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State budgets are spending more, putting in more money for development

Centre's expenditure on non-development categories like salaries, pensions payments has increased

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1 min read Last Updated : Jan 31 2023 | 10:05 PM IST

In the early years of economics and, specifically, budgets, the dominant idea was fiscal conservatism. Budgets had to be balanced, and states could ill-afford to be profligate. The Great Depression changed that belief, with economist John Maynard Keynes arguing for deficit spending. Countries have since then adopted a middle path, expanding the government but within parameters for fiscal responsibility.

India follows a similar approach, with the Fiscal Responsibility and Budget Management Act, passed in 2003, fixing deficit levels.

This approach has not led to fiscal contraction. The central government’s size, or its expenditure, has expanded faster than some economies, but it hasn’t kept pace with the increase in the gross domestic product (GDP) or the value of goods and services produced in the country.